1. Technical Field
The present invention is directed to an improved data processing system. More specifically, the present invention is directed to an apparatus, system and method for managing supply chain risk.
2. Description of Related Art
Often in the production process, multiple complementary goods must be present simultaneously in order to successfully produce a planned product or service. For example, to build a personal computer, a PC manufacturer needs a disk drive, a processor, memory, a CD-ROM drive, a DVD-drive, a system box, a power supply, etc. This list of items required to assemble a product is called the bill of materials (BOM).
If any single item is missing from the BOM, it is not possible to assemble the final product. Thus, even if all of the components for a PC are available except for the power supply, it is impossible to assemble a working PC.
In a complex supply chain, careful coordination among multiple tiers of suppliers is required to successfully deliver the required quantities of input components to the right place at the right time. Often a single supply chain is composed of multiple final assembly facilities, all with different planned outputs. The risk of failure is present along multiple dimensions. These include quantity, i.e. the number of input units supplied by a particular supplier; time, i.e. the time when the units are delivered; space, i.e. the location to which the units are delivered; and quality of the input units.
A number of factors can contribute to supply chain disruptions. These include normal variability in manufacturing and logistics cycle times, as well as low-frequency events such as earthquakes, fires, wars, political turmoil, and strikes. Supply chain failures or disruptions can seriously damage a firm financially. They can also lead to a loss of competitive advantage, erosion in market share, and damage to brand and reputation.
Although manufacturers are aware of these risks, there are no tools currently available to effectively manage supply chain risk. In an effort to lessen such risks, manufacturers can use multiple suppliers, and maintain an excessive surplus of BOM items as a safeguard in case a problem arises with one or more suppliers. However, unless firms can efficiently manage their inventory levels and coordinate with their supplier, these approaches have only limited effectiveness, and can increase the costs to manufacture the final product.
Therefore, it would be beneficial to have an apparatus, system and method for managing supply chain risk to help protect firms from loss of competitive advantage, erosion in market share, and damage to brand and reputation